The following is a summary of recent studies by Eastbridge Consulting featured in its fall newsletter. According to Eastbridge, the focus on fringe voluntary products, like pet insurance, paints a misleading picture about the market for employee-paid benefits. The voluntary market is primarily about selling mainstream products, such as disability, life, and dental insurance. In fact, 44% of the voluntary sales in 2006 were for life or disability insurance.
One of the fastest growing product lines over the past three to four years has been voluntary medical, which includes hospital indemnity, supplemental medical, and limited benefit medical plans.

The Neglected Small Business Market

More than half of the small employers surveyed recently said they don’t offer voluntary benefits because their benefits package is adequate. Thirty-one percent said that voluntary benefits are not important to their employees; 28% said that administration is too complex; 26% said that the products are too expensive; 21% said the product features are not suitable; and 10% said they have never been approached.
      Except “never having been approached,” the reasons that small business owners cited for not offering voluntary benefits are likely to be based on erroneous beliefs about the benefits. “We aren’t serving the small business market well. With this group of employers, we still have a lot of educating to do about voluntary benefits and what role they can play for the small business and its employees,” according to Eastbridge.

Small versus Large Benefit Brokers

The smallest employee benefit brokers are the least sophisticated about the voluntary business. They sell less, have sold for a shorter time, and they are most in need of support and training, according to Eastbridge. The largest brokers were selling far more cases, selling for more years, selling more non-traditional worksite products, and were using a wider variety of enrollment methods. This year, Eastbridge looked more closely at the largest brokers and found that they often rely on worksite carriers to sell and implement their voluntary cases. When asked which voluntary carriers they use most often, they listed Aflac, Colonial, and Unum. A subsequent study showed that these agencies were unlikely to have a distinct voluntary strategy or dedicated voluntary sales personnel.
      Some items, like case size, remained on a continuum (small brokers write the smallest cases, etc.) but others did not. In particular, the mid-size brokers rated much higher on independence factors. They needed far less training and less carrier support than did the small or the large employee benefit brokers. They had been writing voluntary for longer periods and were more likely to enroll their own cases, usually through group meetings. They were most likely to use the traditional group voluntary products (dental, voluntary short-term disability, and voluntary term life) and least likely to use individual platform products.
      These mid-size employee benefit brokers added voluntary products earlier than did other employee benefit brokers and became more self-sufficient as they learned the business. They are more likely to use products offered by the carrier that supply their employer-paid coverages. On the flip side, they are the least likely to experiment with new products and enrollment systems. They got a head start, but they may be stuck in their old ways.

The Pros and Cons of -Specialized -Voluntary Reps

Those just getting started in the voluntary market frequently ask whether they should create a separate sales structure for their voluntary products or use existing reps. The most accurate answer is “it depends.”
Consider the following factors:
• What type of brokers are you targeting?
• Do your sales reps have relationships with the targeted brokers?
• Can your reps handle more products?
• What are your cost restrictions?
The following table looks at the pros and cons of using specialized reps.
Pros:
• It usually produces a higher volume of voluntary sales
• People are usually more comfortable with a broad portfolio of voluntary products
• It allows for capacity expansion.
• Worksite brokers probably already have a relationship
Cons
• It creates another relationship for the broker
• It can create internal competition for the broker relationship
• It usually costs more since it needs more personnel
• If the effort is not focused on worksite brokers, there may not be existing relationships with the targeted brokers
http://www.eastbridge.com/outside/2007/Fall10.htm